Teachable Moment: "What explains the decline of entrepreneurship in the United States?"
There's evidence that the rate of business start-ups is falling. In 1982 new companies (in business less than five years) comprised half of all U.S. businesses. In 2011, they make up about one third. Between 1982 and 2011 the share of the labor force employed at new companies fell from over 20% to 11%. What could explain this decline?
Here are five explanations:
1.) Rising health care costs make it riskier to change jobs.
2.) Increased licensing requirements act as barriers to entry. (29% of US employees had to acquire a government license of certificate in 2008, compared to 5% in the 1950s.)
3.) Immigration policies discourage would-be entrepreneurs from coming to the US.
4.) Aging population, with older workers less willing to take risks, change jobs, move, or start new companies.
5.) Business concentration and bigness. In 2008, for the first time, more Americans worked for large firms with 500 or more workers than worked at smaller firms. This trend continues today.
Ask learners, if you had a choice to start a new bookstore in your neighborhood or work for Amazon, which would you choose? Why?